A new era in mortgage risk assessment

The rising cost impact of factors like insurance, and new datasets which measure them, offers competitive differentiation.

Across the U.S. mortgage market, a new era in risk assessment is emerging. It’s one that has implications for home valuations, market transparency and investment decisions. This shift is driven by twin forces: first, recognition of the growing impact that rising variable home ownership costs and increasingly frequent extreme weather events can have on property values and debt servicing performance. Second, the availability of new datasets – derived from more timely, granular information sourced across the life of a loan - means market participants can now potentially gain an edge over peers who rely on generalized, widely disseminated data.

It's a contrast to the current backdrop, where traditional metrics like credit scores and loan to value ratios are disclosed primarily at loan origination and updated in often rudimentary ways over time, if at all. In addition, mortgage data tends to be applied in broad brush strokes and can lack context regarding the specific market forces or conditions affecting a particular property.

Intercontinental Exchange (ICE) is playing a key role in advancing the market, with the aim of digitizing the entire mortgage lending process. As a result, ICE has a view into nearly every home mortgage in the U.S., with access to comprehensive data at all stages of the housing finance cycle. This means we can help capital markets and mortgage participants understand and manage risk in new ways, a dynamic that was previously challenged by the fragmented data backdrop. Importantly, ICE’s proprietary technology also enables the fusion of data characteristics to financial instruments and applies our patent-pending anonymization process.

A key differentiator of ICE’s data is its location-specific nature. This allows mortgage investors, originators, servicers and the public sector to refine their analysis by incorporating quantified information about the area immediately surrounding a parcel of land. In assessing climate risk for example, most portfolio models still lack property-level data, accurate ownership cost information, and current valuations. ICE’s hazard models offer location-precise scoring across perils such as flood, wildfire, hurricane and extreme temperatures. This information is tied to current property valuations and applied at the loan level through a proprietary process. In this way, location-specific climate exposure can be integrated into portfolio models to help identify securities or loans with concentrated climate risk. The same data can be used for affordability assessments, stress testing, and to identify vulnerable geographic areas.

Similarly, ICE’s data can help quantify home affordability inputs - such as insurance premiums, taxes, home equity, utilities costs, and home prices. Many of these factors are not included in traditional risk management approaches. Yet average annual insurance premiums, for example, have risen on single-family homes by over 60% since 2020¹ and become a greater determinant in home affordability. For market participants, being able to integrate these factors into their models offers a more complete view of the total cost of home ownership.

More broadly, ICE’s mortgage data is unique in covering the full investment spectrum from three perspectives: property level data for residential and commercial real estate; loan level data for participants originating, servicing or trading loans; and mortgage-backed security level data for capital markets users. Across all three levels, the location precision in our data allows more accurate mark-to-market estimates for underlying asset values that secure mortgage loans and securities.

At the property level, our information is refreshed daily, and includes data from tax assessor, deed, mortgage, pre-foreclosure, foreclosure, assignment and release records. This data covers 99.99% of U.S. households with over 240 data fields per record, including finance information, property characteristics and demographic data.

For loan level analysis, ICE McDash covers the vast majority of the mortgage market. With over 30 years of mortgage performance history and 100 data points - including property details and loan collateral/risk attributes - McDash can be used for research, modeling, risk management, compliance and benchmarking. Alongside this, ICE’s Origination Data covers hundreds of fields across borrower characteristics, loan product and program parameters, and property information.

At the security level, ICE draws on its fixed income data expertise to help capital market participants with reporting, analyses, modeling and due diligence requirements. For MBS investors, the ability to link certain data characteristics to specific securities offers the opportunity for more insightful analysis. Here, key products include our AFT Prepayment and Credit Model, Climate data, Home Affordability Analytics and Home Price Dynamics.

As risk assessment across the largest U.S. consumer credit exposure evolves, data that offers granularity, timeliness, and a potential investment edge will become increasingly valued. Here, ICE delivers new insights at the loan, property, and security level - helping a broad spectrum of market participants to better anticipate risk, optimize their portfolios, and support resilient housing strategies.